Ten Essential Steps for Generational Transition a Business must take when Succession Planning.
We have all seen the storyline or plot about generational transitions in family owned businesses. Hollywood has a never-ending source of material on feuds, betrayal, in-fighting and often eventual demise of characters within a family firm. Just think of the Godfather as an extreme. But why is this?
To start with, family owned businesses are a special breed of business. Often still headed by the founder, whether as CEO or after ‘retirement’ as Chairman. These leaders are usually the head of the family too. Their decisions influence other family members both within the business, as well as their home lives.
Change is now constant, and the need to be flexible and nimble never more necessary in today’s world and the increasingly fast pace of change we will see over the next ten years.
Why Change is Important
What is most impacted by Change, yes, its PEOPLE. Large corporations recognise this, which is why the Organisational Change Specialist role is becoming increasingly included in projects. Smaller businesses are just coming to realise that maybe they need help too.
On top of the fast pace of Changes to business models, there is a whole generation of baby-boomer led family-owned businesses where the founder is looking to retire. This can cause more disruption to a company than BREXIT or the emerging technologies that will revolutionise our world.
Generational transition impacts the business, but it also can devastate family relationships if not handled correctly.
Family-owned businesses do not just need a transition plan for roles, responsibilities and strategic goals. They need an emotional and successor style transformation plan as well.
First and foremost, the current owner’s personality, their passions, values and purpose all need to be understood, this is what started the company and driven it ever since. Comparing this to the successor’s personality, their passions, values and purpose will provide insight as to the challenges that could occur. Not taking stock of these key attributes can have dire consequences.
What happens when things go wrong
I recently learned of a business where the founder had to step back in to take the helm of the business he founded in order to save it. Customer acquisition for was based on face-to-face selling, exhibitions and trade shows. The founder was a natural salesman who loved to talk about his products and had successfully grown the business based on these skills. Upon retirement he put his son in charge, whose personality was diagonally opposite to his fathers. Almost immediately business started to drop off. The son tried to follow his father’s winning formula but could not develop the same rapport, it turned out to be his losing formula. Over time he put on weight and started avoiding attending tradeshows. Tension developed between father and son. Eventually the son left, and the family relationship virtually destroyed.
How could this have been avoided. Simply, by understanding the traits of the two personalities involved, their natural skills and how to ensure the son was able to lead the company in his style of leadership, not his fathers. This simple understanding would have been solved by hiring a salesman to replace Dad and letting Son concentrate on running the operations.
There are key signs when someone is not ‘in flow’ e.g. the son put on weight affecting his health, he hated getting up in the morning, he avoided networking. These are the signs of an introverted personality expecting to be able to step into the shoes of an extravert.
Another example was one of my clients who owned four clinics. He had just taken over from his father. Dad had hired most of his clinicians in his own image – risk adverse, nurturing, calm individuals. The son was the opposite type of personality – fast paces, visionary, marketing driven. The staff did not understand him and tension within the organisation reached boiling point. What was missing was someone who could be a ‘dealmaker’ and act as a filter in between.
Ten Steps for Generational Transition as part of Succession Planning
These two examples can be found repeated in many family owned businesses today. But it does not have to be this way. There are ways to make generational transition smoother. These are:
- Understand the personalities (natural talents), purpose and passions of the leadership team, the retiring leader and the new leader. Learn what is their natural flow and style of leadership. What they can be trusted to do well (strengths) and what will be their challenges.
- Develop a transition plan based on the successor’s strengths, purpose and passions.
- Extend these learnings to the family, whether they work in the business or not.
- Allow the retiring leader time to ‘let go’ of their style of leadership so they can learn to trust their successor’s way of running the business.
- Ensure the successor recognises they need to see their role as an entrepreneur, but follow the pathway that best fits their talents, purpose and passions. Moving the business in this direction will provide a greater chance of success.
- Set the successor up for success. Ensure they have the correct team to support them (there is a specific formula for this).
- Bring the other family members and staff along in ways that they are comfortable with. Recognising that ‘one size does not fit all’.
- Ensure the successor checks in with the retiring leader on a regular basis to keep them informed, taking note of their experience and wisdom but applying it in the way that fits the current set-up.
- Get help and guidance to plan, communicate and implement the changes before they occur. Even if this is just in the initial stages of understanding the drivers involved.
- Above all, remember this is a family-owned business established to serve the family. Don’t let Change destroy the precious role families play in a person’s life and the legacy it gives generations to come.
Once a family-owned business realises the power of transition planning in this way, it will recognise it is not an option, but it becomes an obligation to make the changes whilst retaining the unity of the family unit. This in turn will have a positive impact on the employees and the communities they live in and serve.
Gillian Anderson owns Radial 1 Consulting, which specialises in working with family owned businesses to navigate change, whether this is due to generational transition, improving family and team dynamics or preparing for the disruption in business 2020 & beyond. Her whole career has been in organisational change and transformation, supplemented with nearly 20 years of studying Human Behaviour.